World domination

Netflix wants to expand to 200 countries within the next two years

Netflix wants to complete its global expansion within the next two years, the company announced as part of its Q4 2014 earnings release. Here’s how Netflix CEO Reed Hastings and CFO David Wells put it in a letter to investors Tuesday:

“Our international expansion strategy over the last few years has been to expand as fast as we can while staying profitable on a global basis. Progress has been so strong that we now believe we can complete our global expansion over the next two years, while staying profitable, which is earlier than we expected. We then intend to generate material global profits from 2017 onwards.”

These bold statements comes after the company once again showed significant international growth. In Q4, it added a total of 2.43 million subscribers abroad, and now has a total of 18.28 million members in its 50 international markets. Domestically, it ended 2014 with 39.11 million subscribers, compared to 33.42 million a year before that. Netflix ended the year with a total of 57.39 million subscribers, compared to 44.35 million at the end of 2013.

So how did Netflix do money-wise? Not so shabby either: The company booked $1.305 billion in revenue from its streaming operations in Q4 of 2014, compared to $962 million during Q4 of 2013. It was able to generate a surprising $83 million of net income in Q4, compared to $48 million during the same quarter a year ago. However, that growth is in part due to tax benefits of $39 million.

But back to Netflix’s bold international plans. Hastings and Wells made it clear that they’re not just talking about adding a few more countries and then calling the job done:

“We already offer Netflix in about 50 countries and have learned a great deal about the content people prefer, the marketing they respond to and how to best organize ourselves for steady improvement. Acceleration to 200 countries is largely made possible by the tremendous growth of the Internet in general, including on phones, tablets and smart TVs.”

Hastings and Wells even laid out plans to enter China through a smaller, targeted service “centered on our original and other globally-licensed content.” The remarks about China include a caveat about acquiring “the necessary permissions,” which is particularly challenging for a service like Netflix that relies so heavily on smart TV apps. China’s regulators have in the past months cracked down on streaming devices and smart TV services, which they consider similar to running a broadcast station in the heavily regulated country.

The letter to investors names revenue growth as one goal of an accelerated international expansion, with a goal of getting to $10 billion in yearly revenue soon. Based on the Q4 earnings release, Netflix ended 2014 with around $5.5 billion in revenue from streaming and its domestic DVD business combined. But the letter to shareholder also paints Netflix as a global licensor for content, able to compete with some of the biggest media companies in the world:

“With the growth of the Internet over the next 20 years, there will be some amazing entertainment services available globally. We intend to be one of the leaders.”

Here are some other key metrics disclosed as part of the earnings release:

Netflix plans to spend $3 billion on original content in 2015.

The company wants to spend $600 million on marketing this year.

Netflix plans to spend $500 million on technology in 2015.

Netflix grew to five million subscribers across Latin America during Q4 of 2014.

The streaming service intends to release a total of 320 hours of original TV shows, documentaries, comedy specials and movies in 2015, which is three times as much as the company put out in 2014.

This post was updated at 2:30pm with additional metrics on Netflix’s spending and original content plans.

3 Responses to “Netflix wants to expand to 200 countries within the next two years”

It’s all a matter of how you define a country. You are right if you are going by the list of U.N. countries, but Netflix may have decided to recognize Palestine and similar territories… which can bring the number of countries up to 203. Fascinating stuff, actually: